Even though most people here know the majority of the record-producing cycle, I'll review just to make sure that we're all on the same page:

Step 1: Artist X Produces a Demo.
Step 2: Executive Y at Record Company Z listens to the demo.
Step 3: Artist X is signed with Record Company Z.
Step 4: Record Company Z gives Artist X a sum of money and studio time/equipment to produce and record music. Record Companies often have their own engineers to record and edit music, also.
Step 5: Record Company Z has the record/CD/album/single, etc. pressed.
Step 6: Record Company Z either distributes the music (shipping to stores) or pays someone else to do so.
Step 7: Record Company Z takes all income from the sale of merchandise and pays its employees, the distribution company, the recording studio, the pressing mill and everyone else, except the artist.
Step 8: Record Company Z counts the number of units sold and pays the artist a fixed rate per album. This number is usually in the pennies.
Step 9: If successful, Record Company Z pressures Artist X to create another album. The cycle starts again from Step 2.

This dynamic is analogous to only one other business model I know at this time;

The Pimp - Ho Relationship:
The Record Company is the Pimp
The Artist is the Ho
The Stage/Studio is the Corner
The Audience is the Trick

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